APPLE10_324_LH.JPG IPhone is introduced at Macworld in Moscone Center today. Tyler Fazakerley at far right.
cq--Tyler Fazakerley
Photographed by Liz Hafalia
Ran on: 01-10-2007
Apple's new $499 iPhone, in a display case that looks worthy of the Hope Diamond, is admired by Tyler Fazakerley (far right) and others at the Macworld Expo.
Ran on: 01-10-2007
Apple's new $499 iPhone, in a display case that looks worthy of the Hope Diamond, is admired by Tyler Fazakerley (far right) and others at the Macworld Expo.

Apple CEO Steve Jobs jokes around with a fake iPod and rotary dial phone as he introduces the new iPhone during his keynote address at MacWorld Conference & Expo in San Francisco, Tuesday, Jan. 9, 2007. (AP Photo/Paul Sakuma)

Apple CEO Steve Jobs has ushered in a new era at the Cupertino technology company, jumping into the cell phone market with the highly anticipated iPhone and cementing the company's role in the rapidly changing digital media landscape.

Jobs, speaking at the Macworld Expo in San Francisco on Tuesday, unveiled the iPhone, which combines the iPod, a cell phone and an Internet handheld device into one slim, portable gadget. He also announced Apple TV, a set-top box that will allow consumers to move music, photos, television shows and movies from their computer to their living room televisions.

Both products underscore the broad shift the company has made in recent years from computers to consumer electronics as it aims to become a core element in the digital future. To emphasize this philosophical shift, Jobs even said the company was dropping the word "computer" from its corporate moniker.

"From this day forward, we're going to be known as Apple Inc.," Jobs said before a roaring crowd.

Much of the symbolic importance of Jobs' words was overshadowed by the introduction of the iPhone. About 21/2 years in the making, the sleek little device is poised to make a big impact in the mobile digital marketplace.

"It's the best iPod we've ever made," said Jobs. "No matter what you like, it looks pretty doggone gorgeous."

Weighing in at less than 5 ounces, with a 31/2-inch screen, the iPhone looks like an iPod without its well-known scroll wheel. It has no conventional buttons and instead uses touch-screen technology for navigation. It runs Apple's Web browser, Safari, and operating system, Mac OS X.

The iPhone, which also features a 2-megapixel camera, will be available in June through an exclusive, multiyear partnership with AT&T's Cingular Wireless, pending approval by the Federal Communications Commission. The 4 GB version will cost $499 and the 8 GB version $599.

Those prices could be prohibitive in the cutthroat mobile phone market, analysts said.

Consumers will have to purchase a two-year cell phone service plan to even buy an iPhone, said Glenn Lurie, Cingular's president of national distribution. They might also want to purchase a monthly data plan to take advantage of the iPhone's Internet tools, although the Internet features also are available wherever there is wireless Internet access. Current Cingular data plans cost between $9.99 and $39.99 per month.

Cingular CEO Stan Stigman, appearing alongside Jobs, said the cell phone carrier entered into an agreement without even seeing a design for the iPhone. The two have been partners in the past, introducing a Motorola cell phone that incorporated Apple's iTunes software. But that phone, like other cell phone and digital music player combinations so far, was not popular because it proved difficult to use and held a small number of songs.

Jobs also brought Yahoo co-founder Jerry Yang and Google CEO Eric Schmidt onto the stage, though not at the same time. The Internet companies will supply e-mail, mapping, search and other Internet services to the iPhone.

Yahoo will supply a special e-mail service that acts like a BlackBerry and "pushes" the e-mails to the iPhone, so that the user receives the latest message instantly. With Google, whose CEO sits on Apple's board, the iPhone will have Internet search functions and mapping -- including satellite images.

Jobs called the iPhone a revolutionary device that will leapfrog current technology. He said the company expects to sell about 10 million of them next year, which would account for 1 percent of the 1 billion cell phones sold each year around the world.

"Even if they get an itty-bitty share of the market, it translates into" a large number of cell phone sales and opens a new, large market opportunity for the company, said Van Baker, an analyst with research firm Gartner. "It's not just a computer company anymore."

But unlike the MP3 player market, which the iPod has dominated even with the entrance of rivals such as Microsoft Corp.'s Zune two months ago, the cell phone market is much more fragmented. "There is not one device that everyone buys," said telecommunications analyst Jeff Kagan.

Jobs used all his showmanship skills to give the iPhone a good first-day boost from the stage of Macworld. In an Alexander Graham Bell moment during his keynote speech, Jobs made the "first" call on his iPhone to Apple's famed designer, Jonathan Ive.

"I can't tell you how thrilled I am to make the first public phone call with iPhone," Jobs said to Ive.

Jobs also used the iPhone's Google mapping feature to find Starbucks coffee shops near the Moscone Center, where Macworld is being held. He prank-called one of them, ordering "4,000 lattes to go," and then hung up.

Wall Street lapped it up. Shares of Apple rose more than 8.3 percent Tuesday to $92.57 per share. Meanwhile, among its competitors, Palm, the Sunnyvale maker of the Treo smart phone, fell nearly 5.7 percent to $13.92 per share, and Research in Motion, maker of the popular BlackBerry handheld device, dropped 7.85 percent to $131 per share.

Before it is released, the iPhone still must clear a few hurdles. It must be approved by the FCC, which reviews all wireless phones sold in the United States. Apple also will have to settle a name dispute with Cisco Systems, which last month introduced a family of Internet phones it called the iPhone, a name it trademarked.

In a statement, Cisco said it had been negotiating with Apple for several years over the iPhone name and that it expects Apple to sign an agreement to use the name shortly.

An Apple executive said that the company felt it could use the iPhone name because Apple's product applies to a cell phone, while Cisco's product refers to its Internet phones.

The iPhone announcement was the crowning moment of Jobs' keynote at Macworld, an annual event at which he kicks off his company's biggest trade show and also uses the podium to launch new products.

The other product he introduced, Apple TV, is a set-top device that wirelessly beams content from the computer to the television, allowing consumers to download movies and music via the Internet and enjoy them on their home entertainment systems. Users will be able to stream content live from up to five computers as well as program a computer to transfer material automatically onto the Apple TV's 40 GB hard drive.

Apple TV will cost $299 and arrive in stores in February.

In other news, Jobs said that Apple has reached 2 billion music downloads since introducing its popular iTunes music service, selling 58 songs a second. It has also sold 1.3 million movies since launching the movie download service with Disney last fall.

To keep those numbers rising, Jobs announced a new partnership with Paramount to include the studio's movies on iTunes. Also, the number of films available on iTunes will be increased from 100 to 250.

"This is a day I've been looking forward to for 2 1/2 years," Jobs said Tuesday. As he wrapped up the keynote with a live performance by rock musician John Mayer, he added, "I didn't sleep a wink last night. I was so excited about today."